Investors Grow Weary of Catastrophe Bonds and Today’s Other Top Stories

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Last week the World Bank made news when they issued their first ever catastrophe bond. The $30m cat bond will be linked to earthquake and tropical cyclone risk in 16 Caribbean countries.

The new issuewhich matures in June 2017 and pays a coupon of 6.30% over six-month Libor, with a 6.50% floor, is the latest instance of yield-hungry investors leaping into this hottest of asset classes.

Instead, the world’s biggest listed reinsurer quietly pulled the plug on the transaction, which was set to have been about three times larger than the World Bank’s.

“Pricing and capacity targets could not be achieved,” it told investors.

Some market participants say the cancellation is tentative evidence investors are becoming increasingly wary, even as catastrophe bond issuance levels continue to set new records.

“There’s still lots of money coming in, but people are becoming a little bit more sensitive about the yields,” says James Vickers, chairman of Willis Re International, the reinsurance broker. “There are some straws in the wind.”

Todays Other Top Stories

Municipal Bonds

ETF Daily News: – California debt upgrade puts these muni bond ETFs in focus. – After some pretty rough trading in 2013, the municipal bond market has found it easy going this year. Concerns about fluctuating interest rates and financial soundness that troubled the munis last year appear to have taken a back seat for the time being. And the reasons are demand-supply imbalance, falling interest rates and improving credit quality of issuers, resulting in an uptrend in the munis space.

Reuters: – Puerto Rico worries deepen on lawsuits, bond selloff.– Puerto Rico’s troubles continued to worsen on Monday after mutual funds holding about $1.7 billion in its debt sued the commonwealth while other investors sold the bonds on concerns the island’s finances could deteriorate further.

Education

Banking Sense: – How a 10-year Treasury bond works.– Bonds are a fixed income security offering an investor a specified return, during specific intervals, with a full repayment of the principal once it matures. A purchased bond lends money to the issuer, such as a municipality, corporation or the U.S. Government. The U.S. Treasury issues bonds to raise money to fund operations and pay U.S. Government debt. The most watched and invested bond is the popular 10-year Treasury bond.

Indexology: – GOOAL! for mid-year Treasury and muni returns.– The month of June came quickly to a close and with it the half year 2014 index results. At the start of the year, expectations were for yields to be above 3% and climbing.

Income Investing: – Halftime 2014 bond scoreboard: Everybody is winning.– It’s halftime for financial markets in 2014 and unlike the zero-sum games of most calendar years this year is proving that everyone can win at the same time. Stocks, bonds, real estate, you name it, it’s gone up in value.

Treasury Bonds

Business Recorder: – Long yields hit three-week lows.– US Treasuries yields dropped on Thursday as traders eyeing a possible slowing of American economic growth drove up prices for a fourth straight day. Yields of 10- and 30-year Treasuries touched three-week lows as investors, already surprised on Wednesday by data showing the US economy contracted more than previously thought in the first quarter, reacted to data showing short-of-forecast increases in US consumer spending.

WSJ: – With debt yields low, firms dash for cash.– Corporate-bond markets performed well in 2014’s first half alongside an unexpected rally in U.S. Treasury debt. Now, many bond-fund managers worry their early gains are too good to last.

High Yield Bonds

Income Investing: – Junk Bonds: Attractive carry, but limited gains ahead.– UBS‘s wealth management arm strikes a familiar note in its second-half predictions for the high-yield bond market. Like a lot of strategists, UBS doubts junk bonds can muster much more in the way of gains. But like a lot of strategists, UBS doesn’t see much out there that looks better for now, and recommends investors stay overweight the high-yield market, if a bit less overweight than before.

Emerging Markets

Pensions & Investments: – Investing in emerging markets bonds in an unconstrained framework. – A benchmark serves a clear purpose in investment management as it provides a starting point for constructing a portfolio, guides how the strategy should be managed and allows investors to evaluate the performance of the active manager versus a passive alternative.

Pioneer Investments: – Seeking new opportunities in emerging markets debt.– Emerging markets, despite periods of volatility, have demonstrated their resilience to turbulence and we believe they will continue to offer opportunity for selective investors. There are three forces behind the resilience of the Emerging Markets.

Investment Strategy

Kiplinger: – 20 ETF picks to fill the gaps in your portfolio.– The right ETFs can be perfect for filling gaps in your portfolio. Do you need to beef up on foreign stocks? Want to make a bet on companies that will benefit from an improving economy? Looking for more income? We’ll guide you to solid funds for meeting your goals.

Bond Funds

Western Journalism: – Sad story of savings bonds.– There was a time when millions of dollars of U.S. savings bonds were sold in June — for graduation gifts, for wedding gifts, and just because of the patriotic feelings on the Fourth of July. Those days are long gone. The Treasury has yet to post sales figures for 2012 or 2013, amidst speculation that savings bond sales slowed to a trickle as a result of changes made in recent years.